BILL ANALYSIS AB 1649 Page 1 Date of Hearing: April 12, 2010 ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION Joe Coto, Chair AB 1649 (Chesbro) - As Amended: March 15, 2010 SUBJECT : Alcoholic beverage licensees: winegrowers. SUMMARY : Allows a winery to produce spirits of wine (byproduct of wine fermentation) under specified conditions without having to additionally obtain a distilled spirits manufacturer's license. This measure also clarifies current statutes related to privileges of wineries and branch offices. Specifically, this bill : 1)Expands the authorized activities that a licensed winegrower may conduct to include the production of spirits of wine, provided those spirits of wine are either blended into wine produced by the winegrower, sold to an industrial alcohol dealer, or destroyed by the winegrower, as specified. 2)Makes conforming changes with regard to a licensed winegrower's authorization to sell wine and brandy for consumption to consumers on the licensed premises, as specified. 3)Clarifies that current law is not intended to expand the privilege for selling wine to consumers at a premises of branch office to all of a licensee's branch offices but only the office as approved by the Department of Alcoholic Beverage Control (ABC). EXISTING LAW : 1)Establishes ABC and grants it the exclusive authority to administer the provisions of the Alcoholic Beverage Control Act (Act) in accordance with laws enacted by the Legislature. 2)Establishes ABC and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature. This involves the licensing and regulation of businesses involved in the manufacture, importation, and sale of alcoholic beverages in the state. 3)Authorizes a licensed winegrower to conduct specified AB 1649 Page 2 activities, including authorizing a licensed winegrower to sell wine and brandy for consumption to consumers for on-premises consumption, as specified. 4)Authorizes an on-sale beer and wine public premises licensee and a licensed winegrower who exercises his or her license privileges at specified locations to allow a person who has purchased and partially consumed a bottle of wine to remove the partially consumed bottle from the premises upon departure. 5)Allows a licensed winegrower or brandy manufacturer to sell wine for consumption on the premises of a branch office. In essence, extends the wine-by-the-glass privilege that a Type 02's master license has to its duplicate license. 6)Defines an "on-sale" license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (e.g.at a restaurant or bar). An "off-sale" license authorizes the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers. FISCAL EFFECT : Unknown. COMMENTS : According to the bill's sponsor, the Wine Institute, while existing law authorizes a winery to produce the spirits of wine byproduct, it is unclear whether or not the winery needs to obtain a Type 04 distilled manufacturer's license to deal with this byproduct. AB 1649 states a winegrower (winery) does not need to purchase a separate distilled spirits manufacturer's license when producing spirits of wine (byproduct of wine fermentation) provided the spirits of wine are blended into the wine produced by the winegrower, are sold to an industrial alcohol dealer, or are destroyed by the winegrower. Many wineries use reverse osmosis or the spinning cone technique to reduce the alcohol content in their wines. This bill also clarifies current statue relating to the recent enactments of AB 2004 (Evans), Chapter 127, Statutes of 2008 and AB 1470 (Evans) Chapter 535, Statutes of 2009. A provision of current law is amended to state that wineries are only authorized to sell their own wine by the glass or bottle not AB 1649 Page 3 wine which is produced for other businesses. In addition, a provision within AB 1470 is clarified by stating that the privilege for selling wine for consumption on the premises of a branch office is only for the "specific branch office" as approved by ABC. This measure does not change the customary 30-day public notice process that applies to the master license under current law. Background : According to ABC, there are approximately 2,730 licenses issued to winegrowers for production facilities throughout the State. Currently, there are approximately 69 licenses issued to distilled manufacturers. Approximately 50 winegrowers have distilled manufacturer's licenses. Some wineries use either a reverse osmosis apparatus or a spinning cone system on the winery's premises for the purpose of reducing the alcohol content in wine. This procedure produces spirits of wine which is a non potable distilled spirit. Prior legislation : AB 1470 (Evans) Chapter 535, Statutes of 2009. Removed the prohibition against licensed winegrowers or brandy manufacturers from selling wine for consumption at a branch office, essentially extending wine-by-the-glass privileges to a duplicate license. AB 2004 (Evans), Chapter 127, Statutes of 2008. Authorized a licensed winegrower to sell wine to consumers for on-premises consumption, as specified. SB 113 (Thompson), Chapter 238, Statutes of 1993. Permits a licensed winegrower (a winery) to sell wine and brandy to consumers for consumption off the premises or for consumption at a restaurant located at the winery or immediately contiguous to it. A winegrower must produce on the licensed premises not less than 50% of the wines sold to consumers. REGISTERED SUPPORT / OPPOSITION : Support Wine Institute Winemakers of California AB 1649 Page 4 Opposition California Council on Alcohol Problems Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531